While I’ll admit that some things about Tesla’s
TSLA, +0.08%
valuation give me pause — the upstart electric-car company is worth a staggering $35 billion — these knee-jerk naysayers are missing the point.

Tesla is not a conventional car company, run by a typical CEO in the typical way.

Tesla is, for lack of a better word, a sensation. It trades almost wholly based on sentiment — feelings about whether electric cars will supplant hybrids or even combustion engines, hunches about what iconic Chief Executive Elon Musk has up his sleeve next, projections about the ramp-up in production or future vehicle lines.

In other words, much of Tesla’s performance owes itself to investors peering into the future.

I won’t pretend to know whether the company can ever deliver on the mammoth long-term expectations that many have for Tesla and Musk. But I do know that it’s much more likely that this stock will hit $350 before it hits $150. It’s now trading at about $282, up 89% this year.

Here are seven reasons why Tesla’s stock will keep rising:

Momentum: Stifel Nicolaus analyst James Albertine said it best in a note to clients recently, in which he upgraded Tesla and hung a $400 price target on the automaker after saying “Tesla sentiment is like a freight train.” The stock continues to set new highs, and if you look at the 50-day moving average, Tesla punched through this measure in June and hasn’t looked back. Even when it dips, Tesla shares bounce nicely off of those levels — meaning the medium-term trend is clearly higher. Right now, the 50-day average is about $240, and each passing day will move that “floor” higher as long as Tesla stock doesn’t hit a speed bump.

Shorts squeezed out: A lot of the rise in Tesla stock over the past year or so has been on the back of short squeezes. It’s tempting to think that this is the only driver of big moves. However, it’s worth noting that even as volume remains high, the total short interest as of mid-August was 22.5 million shares, the lowest level since October 2013. The bears aren’t defending their turf as Tesla marches higher … they’re giving up.

Musk adds stability to Tesla: Musk told Fox Business anchor Liz Claman that shorting Tesla was “crazy” in 2013. Obviously Musk is talking his book, but remember that the founder has also said he will never sell his shares — a pretty significant floor considering that, as of the last quarter, Musk owned 26.7% of outstanding Tesla common stock! The pundits can argue about whether Musk is the next Steve Jobs, but the real stability that he provides is from his massive holdings of Tesla stock.

Earnings look good: Sure, Tesla earnings were a bit disappointing as profits declined in its July report. But earnings handily topped expectations — and more importantly, investors saw sales continue to march higher. The company beat on revenue, delivering 17% more Tesla Model S sedans than the previous quarter. Like any high-growth stock, profits are secondary to growing the top line and market share — something Tesla has in spades.

Preorder powerhouse: If you have any doubts about the power of Tesla’s sales momentum, consider that last quarter the company was sitting on $228 million in customer deposits. While there’s no easy way to calculate how many vehicles that adds up to, if the typical deposit is $7,000 (which I think is rich), that adds up to 32,500 Teslas already sold. Considering the production target for all of 2014 is 35,000 vehicles — that’s a simply staggering backlog. If that’s not enough, consider these deposits are up from $163 million at the end of last year, a nearly 40% jump in six months. This is the most compelling item on this list of bullish arguments, in my opinion.

Gigafactory buzz: Tesla continued to wow Wall Street with hopes for its Gigafactory, a $5 billion facility that could provide batteries for up to 500,000 vehicles a year. Not only will this help Tesla margins and improve the efficiency of production, but theoretically Tesla could also be in the business of selling those batteries to other manufacturers. This kind of long-term scheme is obviously speculative, but given the success of Musk with other ambitious ventures, there’s enough optimism to make this expensive project a net positive for Tesla right now.

Model X debut: Over the next year, expect the hype around the Tesla Model X to reach a fever pitch, perhaps unmatched even by the splash created by its iconic Model S sedan. Remember, Tesla has the highest owner satisfaction of any car covered by Consumer Reports. There is almost zero chance this enthusiasm won’t cross over into support for this SUV, and the cult of Tesla will continue to captivate Wall Street.

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